In a post-Covid world marked by a slowing global economy, rapid technological disruption and a volatile and complex business environment, enabling growth has become harder than ever. In turn, this makes the CFO’s role into that of a strategic business partner, capable of guiding the organisation to fully realise its growth plans. Ajay Aggarwal, Executive Director and Chief Financial Officer at Cyient, play a multi-faceted role – one that includes responsibility for driving business growth, improving business processes, mitigating risks, interacting with investors and grooming future talent.
FROM THE EDITOR
The hikes in interest rates, in quick succession by the Reserve Bank of India, amounting to a little under 100 basis points, is clue enough that the central bank sees price instability as a troubling factor. We have previously argued, many times over, that in our view the RBI was behind the curve and misjudged the fact that inflation was likely to become sticky, having previously viewed it as a transitory phenomenon. However, more recently, with numerical evidence it is clear that inflation is systemically ingrained and hence the hardening of monetary policy. The fact is, a lot of inflation is imported, with the war in Ukraine being the primary culprit. Commodity prices, both with respect to food and energy, have zipped upwards in a matter of months and it seems quite unlikely, at the present time, that they will correct in the near future. On the contrary, oil prices will remain stratospheric as European countries clamp down on Russian supplies, leading to greater demand pressures from other OPEC producers.
For the CFO, the significance of day-to-day ‘Finance’ work is diminishing relative to new demands around business leadership. Apart from a basic technical/accounting background, the key skills and competencies today’s CFO must possess rest on four fundamental pillars: leadership, operations, controls and strategy. Sumendra Jain, CFO (India & Asia Pacific) at SMS India, believes that for Finance leaders to be effective business partners, they must have the necessary leadership and communication skills. Additionally, to be able to offer an independent perspective, they must possess a strong understanding of the company's business model and industry. CFOs should also be able to identify opportunities for top-line growth, manage downside risks and drive profit improvement, not just through the traditional methods of cost-control, but using new methods like product line/regional profitability analysis and benchmarking against industry players. Sumendra’s 25-year-long career offers insightful lessons and learning for executives in general and CFOs in specific.
After a difficult fourth quarter (Jan-Mar), businesses are feeling more positive about their growth prospects going into the new financial year. Recently, we ran the Q1FY23 (Apr-Jun) edition of our quarterly Business Confidence and Performance Index (BCPI) survey. The headline index, which had dropped to 66 in January, from a 6-year high in October, inched up to 69.6 in April. Most businesses report a strengthening outlook on their performance while remaining cautiously optimistic about the external environment. At a recent joint session of the India CEO and CFO Forums, we presented the headline results of the BCPI’s latest edition. This set the context for an open-house discussion among our members about their respective organisations and sectors.
With governments striving to take their economies cashless, Central Bank Digital Currencies (CBDC) are all the rage among policymakers, tech enthusiasts and end-users alike. According to the Atlantic Council’s CBDC tracker, 91 countries, accounting for over 90% of global GDP, have either launched, are piloting or are developing a CBDC (see chart) – which is really the electronic equivalent of paper money. India aims to introduce it in FY23. This paper provides a brief overview of the phenomenon.
Covid-19 has caused massive disruptions in global supply chains. Restrictions on mobility, port congestion and delayed shipments have been made worse by a worldwide shortage of shipping containers. On the other hand, consumer demand has grown exponentially, leading to acute inventory management challenges. As a result, companies have had to change their warehouse management models to incorporate resilience together with flexibility. This can involve anything from tweaking operational practices to entirely upending the business model. This paper offers insights from a few innovative examples from the Indian context.
Businesses have long recognised that success is linked to having the right leaders in the right place at the right time. Despite this, only a few organisations have figured out effective succession management (SM) approaches that yield results. Far-sighted companies are able to establish deep and long-lasting ‘bench strength’ by treating succession planning as more than just a mechanical check-the-box process. In practice, they have combined two approaches – succession planning and leadership development – to establish a long-term talent management strategy. Based on discussions with leading firms, this paper offers inputs on how to develop an efficient succession management strategy that maintains a steady supply of leadership talent.
India’s foreign policy choices have become significantly complicated with the Russian invasion of Ukraine. Apart from the immediate threat to world peace, the significance of China borrowing from the Russian template to fuel its own expansionist plans is lost on no one. For India, the choices are not easy, given its legacy of military dependence on Moscow, an ‘incomplete’ relationship with the US and the rise of an aggressive China at its doorstep. To seek a view on these issues, we hosted Jayadeva Ranade, former Member and Additional Secretary, National Security Advisory Board, and President of the Centre for China Analysis and Strategy, at a recent India CEO Forum session.
With growth opportunities abounding, companies are boldly looking at transformational deals to build scale and new capabilities. M&A activity in India is near an all-time high. Significantly, this wave is being led by first-time buyers, who accounted for over 80% of all deals closed in 2020 and 2021. However, there are continuing uncertainties around tax and regulatory issues arising from M&A. To optimise their M&A strategy, it is critical for CFOs to take stock of the evolving deal landscape and understand the tax and regulatory implications. At a recent session of the India CFO Forum, Pranav Sayta, Partner and National Leader of the International Tax and Transaction Services practice at EY India, presented an update on these issues.
In a break from the past, Indian politics is seeing continued stability at both the Central and the state level. The BJP won four out of five recent state elections, which has helped it consolidate its pole position in national politics. It has also set the course for the run-up to the next general elections in 2024 and will have implications for policymaking in both the immediate-term and the medium-term. At a recent session of the India CEO Forum, R Jagannathan, Editorial Director of Swarajya, an independent magazine, shared his outlook for Indian politics and policymaking in the long lead-up to 2024.
While there is little doubt that India’s GST regime has brought benefits, there are continuing challenges around implementation and compliance. These relate to e-invoicing, input tax credit, treatment of free samples and other such nitty-gritties. In the last five years, there have been some 830 modifications to the GST rules, and over 200 circulars have been issued. This makes it extremely challenging to keep track of changes. The government has proven responsive in terms of finding solutions and providing the necessary support to industry. However, a large number of legal/interpretational issues are unresolved, including the lack of a GST Appellate Tribunal, which makes it hard to resolve disputes without litigating. At a recent session of the India CFO Forum, Sandeep Chilana, Managing Partner at Chilana and Chilana Law Offices, reviewed the current GST regime and the top GST-related challenges facing CFOs today.